Deutsche Bank enters the BNPL market

As the BNPL market undergoes its first crisis, the German bank unveils a BNPL solution that targets online merchants and marketplaces with easy, non-intrusive integration and signals its return to the payments business.

FACTS

• Deutsche Bank has partnered with Austrian fintech Credi2 to develop its white label BNPL solution for invoice and instalment purchases.

• Deutsche Bank intends to start a pilot of the new BNPL solution this year.

• Within Deutsche Bank, the BNPL project is being driven by the Merchant Solutions unit, a division of Payment Services, which was reactivated last year and is part of the corporate customer business.

• The solution will be offered on a white label and own label basis for online merchants and e-commerce marketplaces in Germany.

• Deutsche Bank assesses the risk of non-payment and fraud in real time and includes the claims from the respective sales contract in its own risk portfolio.

•  It can be flexibly integrated into the payment process.

CHALLENGES

• Not to interfere in the customer relationship:  To distinguish itself from other players already in the market such as Klarna, which positions itself as the main point of contact with customers, Deutsche Bank is offering a white label service.  Merchants can offer this payment solution under their own brand name, which ensures customer loyalty and increases sales. Deutsche Bank wants to establish itself as the main payment partner for its corporate customers, i.e. to become a true "acquiring" bank once again.

• A timing issue: While the BNPL market is currently going through a period of turbulence, with the valuation of the main players in the market falling, the bank is betting that it is more the business model of these players that is problematic than BNPL itself. In addition, traditional banks can speculate that regulation and rising interest rates may favour traditional banking players in the medium term.

MARKET PERSPECTIVE

• Bill buying, which has dominated Germany for decades, has firmly established itself as one of the top 3 payment methods in terms of number of transactions in e-commerce, alongside wallet payments and direct debits.

• In Germany, where the banking landscape is quite fragmented, local banks have not entered the BNPL market. Santander Bank, which has a Consumer Finance business in Germany, has launched its Zinia offering, an apparently quite successful BNPL solution, with 2.5 million customers, and plans to expand across Europe.

• Financial institutions, such as Magerkurth-Volksbank or Hamburg Varengold Bank, act as refinancers for BNPL providers such as Billie or Ratepay.